CNH Aims to More Than Double Net Income by 2018 on Asia Growth

May 08, 2014 4:51 pm ET

May 8 (Bloomberg) -- CNH Industrial NV plans to more than double profit by 2018 as the maker of Iveco trucks and New Holland tractors sets its sights on expansion in Asia.

CNH aims to boost net income to $2.2 billion in 2018 from $800 million in 2013 as revenue may grow 3.2 percent a year to $38.3 billion, Basildon, England-based CNH said today in a statement. The manufacturer intends to pay dividends of 30 percent of its net income through the period.

The company plans to invest $11.7 billion to add to its lineup and expand into new countries, Chief Executive Officer Richard Tobin said today in Auburn Hills, Michigan, while presenting investors with his strategy through 2018.

“We embrace the challenges that lie ahead,” Tobin said. “We will be bold where we have the advantage and react quickly and decisively when markets turn against us. In essence, we will compete.”

The company’s stock has been listed in New York and Milan since Sept. 30 after Chairman Sergio Marchionne merged Turin, Italy-based Iveco producer Fiat Industrial with its CNH agricultural and construction-equipment division.

Marchionne, 61, has estimated that the companies’ combination, with products that include Case bulldozers and FPT ship engines, formed the world’s third-largest capital-goods company.

Earnings Dropped

CNH earlier said its first-quarter operating profit under U.S. GAAP slipped 2.1 percent to $412 million because of a drop in South American deliveries and currency effects in the region. Revenue fell 0.1 percent to $7.54 billion and net income slid 9.9 percent to $100 million.

Industrial confidence in Brazil dropped in April to a five- year low, and analysts polled weekly by the country’s central bank estimate economic growth in the country will slow from the 2.3 percent increase posted last year. A “significant decline in demand” in Brazil hurt truck and agricultural-equipment sales, with demand also hurt by “instability” in Venezuela, CNH said.

“I see nothing particularly good” in the earnings report, as industrial debt widened and cash flow was “much more negative than expected,” Gabriele Gambarova, an analyst at Banca Akros SpA, said in an e-mail to clients.

CNH fell as much as 4.8 percent, the steepest intraday drop since Jan. 30, and was trading down 2.1 percent at $11.36 as of 3:28 p.m. New York time. The stock is little changed for the year, valuing the manufacturer at about $15.4 billion.

--With assistance from Francesca Cinelli in Milan.